2017 (8) TMI 676 - HC - VAT and Sales Tax

Levy of tax - works contract - Section 3-F(2)(b) of the Act - Whether the goods brought from outside the State of U.P. and used in the execution of works contract can be subjected to tax despite the fact that the turnover pertaining to the works contract is exempted from payment of tax in view of Section 3-F(2)(b) of the Act read with Section 3 of the Central Sales Tax Act, 1956? - Held that - Section 3-F(2)(b) clearly exempts from the applicability of trade tax the amount representing sales value of goods covered by Section 3, 4 and 5 of the Central Sales Tax Act, 1956. In order to enable the revisionist to claim benefit of the provision, it would have to be shown that the amount representing the sales value of goods brought from outside the State of U.P. was for the works contract - The assessee appears to have proceeded on the premise that as for the previous years, in similar circumstances, the import of goods for works contract was accepted by the department, as such, the facts need not be established all over again. An opportunity to establish such facts ought to have been given more specifically, if the department intended to take a view different from the previous years. In the opinion of this Court, the Tribunal ought to have given an opportunity if assessee s case was being non-suited on facts - The Tribunal shall examine that aspect of the matter afresh. Whether the learned Tribunal was justified in levying tax on road marking plastic powder used in the marking of central line on the National Highways/Roads as Paint being an unclassified items, since it is a pigment and used in the execution off works contract? - Held that - the Tribunal has observed that even if such material is not treated to be paint, yet it would be treated as an unclassified item. The finding in that regard of the Tribunal appears to be vague. Specific case of the assessee was of import of thermo plastic materials, used for the purposes of laying lines on the highways. The process had also been substantiated before the Tribunal. Tribunal, therefore, was required to return a finding as to whether the material utilized for the contract was paint or thermo plastic road marking material. The Tribunal appears to have lost sight of the fact that assessing authority had acknowledged the product as thermo plastic road marking material. Appeal allowed by way of remand.

Summary

Issues:
1. Taxability of goods used in works contract from outside State of U.P.
2. Tax imposition on road marking plastic powder in works contract.
3. Consistency in tax imposition across assessment years.

Analysis:

Issue 1: Taxability of goods used in works contract from outside State of U.P.
The revisionist, engaged in trading hardware and contract work for road marking, imported thermo plastic powder and glass beads for marking highways. The assessing authority imposed tax, considering road marking material as paint. The Tribunal upheld the tax imposition, stating the revisionist failed to prove the materials were used for the works contract. The revisionist argued for exemption under Section 3-F(2)(b) of the U.P. Trade Tax Act, citing past exemptions and filed evidence. The Court noted factual determination is crucial for exemption eligibility and remitted the issue to the Tribunal for fresh consideration, allowing the revisionist to provide necessary materials.

Issue 2: Tax imposition on road marking plastic powder in works contract
The Tribunal considered the road marking material as an unclassified item if not paint, rejecting the revisionist's claim. However, the Court found the Tribunal's finding vague and contradictory as the assessing authority acknowledged the material as thermo plastic road marking material. The Court directed the Tribunal to reexamine the issue and make a specific finding on whether the material used was paint or thermo plastic road marking material, emphasizing compliance with the law.

Issue 3: Consistency in tax imposition across assessment years
The revisionist highlighted the department's previous acceptance of imported goods for works contracts in similar circumstances, questioning the change in view. The Court criticized the lack of proper examination by the authorities and directed the Tribunal to reassess the issue, ensuring a fair opportunity for the revisionist to establish facts and maintain consistency in tax treatment across assessment years.

In conclusion, the Court disposed of the revision, emphasizing the need for a thorough examination of factual aspects, proper classification of materials, and consistency in tax imposition, directing the Tribunal to reconsider the issues in accordance with the law.